DECEMBER 31, 2018

By Shailesh Sheth, Advocate

f. SIMPLIFYING the refund process and widening its ambit - Oh! that ever - elusive refund…!

Council's recommendations:

The Council has made the following significant recommendations on the refund front:

i. A scheme of single authority for disbursement of the refund amount sanctioned by either the Centre or the State tax authorities would be implemented on pilot basis. The modalities for the same shall be finalized shortly.

ii. All the supporting documents/invoices in relation to a refund claim in Form GST RFD-01A shall be uploaded electronically on the common portal at the time of filing of the refund application itself thereby obviating the need for a taxpayer to physically visit a tax office for submission of a refund application. GSTN will enable this functionality on the common portal shortly.

iii. The following types of refunds shall also be covered within the scope of Form GST RFD-01A:

a. Refund on account of Assessment/Provisional assessment/Appeal/ any other order;

b. Tax paid on an intra-State supply which is subsequently held to be inter-State supply and vice-versa;

c. Excess payment of tax; and

d. Any other refund.

iv. In case of applications for refund in Form GST RFD-01A (except those relating to refund of excess balance in the cash ledger ) which are generated on the common portal before the rollout of the functionality referred to at point (iii) above and which have not been submitted in the jurisdictional tax office within 60 days of the generation of ARN, the claimants will be advised through their registered e.mail Ids as to where to submit the said refund applications. In case the applications are not submitted within 15 days of the date of the e.mail, the refund applications shall be summarily rejected and the debited amount, if any, shall be re-credited to the electronic credit ledger of the claimant.

v. Clarifications shall be issued on certain refund related matters like refund of ITC accumulated on account of inverted tax structure, disbursal of refunds within the stipulated time, time allowed for availment of ITC on invoices, refund of accumulated ITC of compensation cess, etc.

Comments:

Since the introduction of GST regime on July 1, 2017, the issue of refund has remained a sore point for the taxpayers! The taxpayers have been bearing the severe financial burden caused by the huge pendency of their refund claims. The ambiguities in the statutory provisions governing the refund coupled with the technical glitches experienced in the filing and processing of the refund claims have only worsened the situation for the taxpayers. The Council, fully conscious of this burning issue and the resultant resentment amongst the taxpayers, has made several attempts to simplify the refund process and also expedite the grant of refund. Nevertheless, the taxpayers continue to suffer!

It appears that the Council has now taken a very serious view of this state of affairs and to undertake almost a revamping of the entire refund process. The approval to the proposed Single Interface for disbursal of refund and the proposed facility for uploading the supporting documents/invoices at the time of filing the claim reflect the Council's resolve to address the woes of the taxpayers.

The scope of the refunds is also being significantly expanded so as to cover the refund arising on account of excess tax payment, accumulated ITC due to inverted tax structure, etc. In fact, aside from the specifically described matters in the Press Release, the recommendation also seeks to cover 'any other refund' within the scope of Form GST RFD-01A. This expanded scope of the refund shall certainly prove to be a boon for the taxpayers and will also streamline the whole refund scheme and process under the statute.

The clarifications proposed to be issued covering the matters like refund of ITC accumulated on account of inverted tax structure, disbursal of timely refunds, etc. shall be awaited with interest by the taxpayers. One may, however, watch the stipulated time limit being provided for submission of the applications in the jurisdictional tax office pending the availability of functionality concerning the expanded scope of the refunds as above.

For some inexplicable (or are they obvious?) reasons, the aspect of refund under the taxation statutes has always been like a battle front with the tax officers and the taxpayers both at constant loggerheads over it! It is unfortunate that the GST regime, in its nascent stage itself, is also afflicted with the 'war over refund'! The path to refund always remains littered with so many road-blocks and potholes that an exasperated soul may cry 'foul'! The Council's sincere attempts to simplify the whole process and widen the scope of the refund may, therefore, be viewed with some cynicism!

So, let us hope that the proposed recommendations, when implemented, will deliver what is promised and the Council will also continue to monitor the situation carefully, effectively and vigorously!

"Intaxication:  Euphoria at getting a refund from the IRS, which lasts until you realize it was your money to start with."

  (Author unknown, from a Washington Post word contest.)

III. Recommendations relating to the proposed amendments in GST laws (Legal initiatives):

Council's recommendations:

The Council has given in principle approval to the following amendments in the GST laws:

i. Creation of a Centralised Appellate authority for Advance Ruling (AAAR) to deal with cases of conflicting decisions by two or more State Appellate Advance Ruling Authorities on the same issue.

ii. Amendment of Section 50 of the CGST Act to provide that interest should be charged only on the net tax liability of the taxpayer, after taking into account the admissible input tax credit i.e. interest would be leviable only on the amount payable through the electronic cash ledger.

Comments:

Aside from the Fiscal and Policy initiatives, the Council has also taken some Legal initiatives, albeit, in a small measure. The Council has in principle approved the proposed amendments in the areas of AAR and the interest.

i. Creation of Centralised AAAR - Will it bear fruit?

It is proposed to amend the CGST Act, 2017 to pave the way for the creation of a Centralised AAAR to deal with the cases of conflicting decisions by two or more State Appellate Advance Ruling Authorities on the same issue. While the proposal sounds quite laudable, the creation of such Centralised Appellate Authority may not be of much help to the taxpayers.

It is by now obvious that the very constitution of the 'Advance Authority for Ruling' and its functioning require complete revamping. Considering certain rulings on a few critical issues rendered by the AAR - at times, even conflicting rulings on a particular issue by AAR of different States -, this ' Dispute Prevention Mechanism' is or may well be turning out to be a ' Dispute Mongering Mechanism' ! If there is a decay in the roots, one can't really expect the tree to bear healthy fruit, isn't it ?

The creation of Centralised AAAR may be a welcome gesture, but it may only address the problem partially. The Council must take a very holistic and serious view of the entire AAR mechanism and completely overhaul it in a manner so as to make it robust, independent, free of revenue bias and capable of fulfilling its avowed objective and that is, prevention of tax disputes.

"Bureaucracies are inherently antidemocratic. Bureaucrats derive their power from their position in the structure, not from their relations with the people they are supposed to serve. The people are not masters of the bureaucracy, but its clients."

[Alan Keyes]

ii. Recovery of interest only on net tax liability - This is really 'Interest'ing...!

In a significant move, the Council has approved a proposed amendment of Section 50 of the CGST Act, 2017 so as to provide that interest should be charged only on net tax liability and that is, the amount payable in cash after taking into account the admissible ITC.

The proposal is quite bold, frank and shows the Council's pragmatism and open-minded approach to certain serious issues being faced by the taxpayers. The proposal, if implemented in its right earnest, would save the taxpayers from the huge interest burden. It may also lead to some interesting possibilities like filing of only part-return in Form GSTR-3B by a taxpayer facing the ITC deficit and cash crunch so as to meet his tax liability for the month. In all, the proposal shall certainly mean a lot to the taxpayers in MSME Sector who are facing a severe cash flow problem presently.

[To be concluded...]

[The author is founder M/s SPS Legal and the views expressed are strictly personal.]

See Part I , II